Comment: Ambitious entrepreneurs can thrive in Germany

There are not too many examples of Scottish businesses having success in Germany. However, thanks to his persistence, experience and love of good Bavarian beer, Anthony Ashbrook and his co-founders Tim Lukins and Jan Wessnitzer are well on the way to cracking Europe's largest and wealthiest market.

Scotland's entrepreneurs can thrive in Germany's citites such as Munich, says David Scrimgeour. Picture: David Scrimgeour

Anthony and I first met in October 2016 during a tech mission to Munich which I was organising for the Scottish Government as part of the “Can Do” initiative. He was representing Machines with Vision, an Edinburgh-based start-up he founded with two colleagues that specialises in artificial intelligence. Since then, Anthony has travelled to Germany more than 20 times to follow up on contacts and opportunities, taking advantage of the direct flights from Scotland to most of Germany’s larger cities. As Anthony says: “Germany is just as accessible as London”.

Like any foreign market, new entrants struggle to make their way in Germany. German customers tend to think it is not worth the risk of getting into business with a new and untested supplier, which may not survive. In fact, 70 per cent of foreign companies in Germany fail within two years. So the only way to convince the doubters is to show commitment.

The first breakthrough for Machines with Vision was entering a 2017 competition at a Berlin accelerator run by Deutsche Bahn, the national rail operator. The Scots competed against one hundred other start-ups and won one of five places on a three-month programme with €25,000 funding. A key part of the programme was a proof of concept project with Deutsche Bahn to develop a solution for more effective track maintenance. This was completed successfully and Machines with Vision now has ongoing business with the company.

”I love technology,” says Anthony. “But not for its own sake. The real attraction of working in this way with German companies is that it is all about problem-solving in the real world with real issues.” Large organisations notoriously have difficulty innovating because of hierarchical structures and slow processes. As the pace of technological change quickens, this problem is a serious competitive disadvantage.

One solution for companies is to engage with entrepreneurs to access new technologies and applications. In a “venture clienting” relationship, the corporation becomes a customer. There is no equity taken and the intellectual property stays with the start-up, which becomes an approved supplier. The entrepreneurs learn to adapt their business model to the larger company’s processes and gain valuable insights on pricing and quality.

The next success for Machines with Vision was in Munich earlier this year, winning a competition managed by the TechFounders accelerator. Some 200 start-ups competed for just eight places. Machines with Vision brought its experience with Deutsche Bahn and scoped out, in advance of their pitch, a project with Knorr Bremse, one of the accelerator’s partners. This was a decisive factor in winning a place on the intensive twenty-week funded programme of coaching, mentoring and networking with experienced entrepreneurs and investors. Anthony describes the experience as “world class”.

The goal is to have long-term business with leading German companies to generate revenue and build the business. Machines with Vision is also working with UK companies, including Jaguar Landrover, on autonomous vehicle development. But Germany, Anthony is certain, offers the best opportunities, with a striking industry “breadth and depth” where even medium-sized companies are often “world-leading in their own specific niches”..

The Machines with Vision experience over the last two years shows what ambitious entrepreneurs can achieve in Germany. It is a predictable market which will reward effort and consistency. And the beer is always good!

David Scrimgeour MBE, is a Munich-based consultant specialised in Scottish trade and investment with Germany.